Article by
Barbados Today

Published on
April 11, 2017

The foreign reserves picture appears to be getting gloomier, with noted Caribbean economist Marla Dukharan that in February 2017 the reserves had recorded “its fastest pace of decline” since November 2013.

And the situation is not expected to get any better anytime soon, according to the RBD Group economist.

In the April 2017 RBC Caribbean Economic Report, Dukharan quoted Central Bank data which showed that the reserves fell by 29 per cent in February when compared to the same period last year, to approximately $658 million – or about two months of import cover, “partly due to the domestic monetary base expanding 18 per cent year on year in February 2017 to $2.35 billion”.

At the end of December 2016 the reserves stood at about 10.3 weeks of import cover or $681 million.

It was the 21st consecutive month of declining reserves, the report said.

In a supporting interview, Dukharan said this suggested that the underlying problem was “not temporary in nature”.

And while Government has said that foreign exchange inflows were expected from a number of sources, these were “one-off” or “exceptional” inflows and not necessarily the way in which the country would typically earn foreign exchange, she cautioned.

“The US inflows raised from debt – from the development banks or otherwise – have to be repaid with even more US dollar over time, and the Barbados Government is already running a primary fiscal deficit,” she said, adding that further debt would drive total debt servicing costs even higher.

Dukharan also cautioned that in light of chronically weaker US inflows, borrowing more United States currency now could make things worse in the medium to long term, adding that US inflows for projects were also largely temporary and would flow back out as materials and equipment were imported for the execution of those projects.

“While authorities may suggest that reserves are likely to increase in the near future based on these inflows, I want to caution that any such increase in reserves would be temporary, and would not suggest that the underlying problems have been resolved. The major factor driving reserves lower is the fiscal deficit, and until this is addressed, reserves will continue to come under pressure,” she warned.

The regional economist said it was also important to watch the extent to which the Central Bank was financing Government’s programmes and the negative implications it had for the level of reserves and the exchange rate.

Data to February this year showed that the Central Banks holding of Government debt expanded by 47 per cent year on year to $2.02 billion or 72 per cent of the bank’s total assets, up from 56 per cent in February 2016, or more than twice the level it was in May 2015.

“This demonstrates that Central Bank of Barbados printing and financing of the Government’s spending is still underway,” Dukharan said, adding that coupled with that was the estimation by the International Monetary Fund (IMF) that about 74 per cent of the assets of the National Insurance Scheme was Government debt, which could affect the scheme’s ability to honour its liabilities.

She said it was difficult to imagine that Government would reduce reliance on the Central Bank and the NIS to finance its spending, given that the latest Budget made provision for a wider fiscal deficit for the 2017/2018 financial year.

She said the most two recent downgrades of the island’s ratings “reflect the risk of holding Barbados Government debt, given unsustainably high fiscal deficits leading to weaker reserves and debt overhang”.

And with general elections due within the next year, Dukharan said it meant things may not operate “normally” and therefore Government was less likely to exercise fiscal prudence and implement any major policy shifts that could jeopardize their chances of staying in power.

This DLP admin rubbishes all reports DEM deem unfavorable & this one will be viewed no differently. The bigger problem is not the officials that reject these reports but the sheep who follow blindly after DEM.

This DLP admin rubbishes all reports DEM deem unfavorable & this one will be viewed no differently. The bigger problem is not the officials that reject these reports but the sheep who follow blindly after DEM.

I wonder how many people really understand just how bad our economic circumstance are? Every week we get closer to a cataclysmic financial event, yet people seem more concerned about what people wear at the QEH…When did we become so numb to reality?

I wonder how many people really understand just how bad our economic circumstance are? Every week we get closer to a cataclysmic financial event, yet people seem more concerned about what people wear at the QEH…When did we become so numb to reality?

This is what Eric Lewis, Bentley Williams, Lisa Moore who knows less and John Herbert should be commenting on.

Give me your feedback on this- Posting about what the BLP did does not solve the issue we have- our foreign reserves are disastrously low………Tell me how lamenting on what the BLP did will boost our reserves?

Bentley Williams, i debate and discuss issues daily……The BNTCL sale was one measure being employed to boost foreign reserves- there is an injunction now brought on by rubis to stop this sale as they want half- If the sale does not go thru, what are our other options? The dlp went ahead against the chief town planner’s advise on getting a feasibility study on the HYATT construction- this is because the dlp is desperate for money to put back in the foreign reserves.

What is the solution here? I don’t care what the blp did- This is why i marched because my economy is crashing- Put forward solutions or let we agitate for accountability- this is the current govamunt not the blp.

This is what Eric Lewis, Bentley Williams, Lisa Moore who knows less and John Herbert should be commenting on.
Give me your feedback on this- Posting about what the BLP did does not solve the issue we have- our foreign reserves are disastrously low………Tell me how lamenting on what the BLP did will boost our reserves?
Bentley Williams, i debate and discuss issues daily……The BNTCL sale was one measure being employed to boost foreign reserves- there is an injunction now brought on by rubis to stop this sale as they want half- If the sale does not go thru, what are our other options? The dlp went ahead against the chief town planner’s advise on getting a feasibility study on the HYATT construction- this is because the dlp is desperate for money to put back in the foreign reserves.
What is the solution here? I don’t care what the blp did- This is why i marched because my economy is crashing- Put forward solutions or let we agitate for accountability- this is the current govamunt not the blp.

Ryan you’re a lost cause. You strutting around side Stepping the points that ppl have made to garner likes on a post. Leh me brek it down fa you… iffing you got a woman… and she horn you so you done wid she. You got anudduh woman and she horn you too. Does it mekk sense gine back to de first woman cause she jump up and piss parade cause de new woman horn ya? Is there something wrong wid asking de first woman “how am I to know you ain’t gine horn me again?”

Ryan you’re a lost cause. You strutting around side Stepping the points that ppl have made to garner likes on a post. Leh me brek it down fa you… iffing you got a woman… and she horn you so you done wid she. You got anudduh woman and she horn you too. Does it mekk sense gine back to de first woman cause she jump up and piss parade cause de new woman horn ya? Is there something wrong wid asking de first woman “how am I to know you ain’t gine horn me again?”

If I was PM or Minister of Commerce I wud ban importation of cars for a period of time like Tom did. Ban importation of bread and pastry items among other things… chicken patties, nuggets that I does see in Cost u More and Shop not so Smart among other places. We importing a lotta unnecessary crap! Daz wha depleting foreign reserves but duh ain’t got a boy in parliament wid de balls to ban certain imports and when government changes dem ain’t gine do it either.

If I was PM or Minister of Commerce I wud ban importation of cars for a period of time like Tom did. Ban importation of bread and pastry items among other things… chicken patties, nuggets that I does see in Cost u More and Shop not so Smart among other places. We importing a lotta unnecessary crap! Daz wha depleting foreign reserves but duh ain’t got a boy in parliament wid de balls to ban certain imports and when government changes dem ain’t gine do it either.